LHMeyer/Monetary Policy Analytics
In her testimony, Yellen continued to argue that “it’s premature to conclude that the underlying inflation trend is falling well short of 2 percent. I haven’t reached such a conclusion” (7/13). She saw inflation risk as being “two-sided,” citing not only the recently low inflation numbers but also a labor market that is quite tight […]
The prospect of fiscal policy changes continued to be a key factor in policymakers’ thinking about monetary policy. The FOMC minutes revealed that less than half of participants incorporated assumptions of fiscal stimulus in their June economic projections. Bostic noted that: “We’re going to let the Congress do what the Congress is going to do, […]
Several policymakers drew attention to financial stability concerns last week, although they concluded that the current situation warrants monitoring rather than any immediate action. Yellen noted that “Asset valuations are somewhat rich if you use some traditional metrics like price earnings ratios, but I wouldn’t try to comment on appropriate valuations, and those ratios ought […]
FOMC participants continued to hold divergent views of inflation prospects and the implications for the timing of further rate hikes. Williams saw inflation as being pulled down by “transitory factors” and focused on the overheating risk posed by what is a “very strong” labor market as suggested by U-3 being below the NAIRU by “a […]
Following the June FOMC meeting, several policymakers shared their views on Fed policy. Dudley justified the June rate hike as appropriate to avoid a scenario in which the FOMC waited too long to tighten and would then have to “slam on the brakes.” He thought that tightening should be performed “very judiciously” to “sustain” the […]
Policymakers’ continued to have different views on the implications of recent inflation data for the pace of normalization. However, policymakers were generally hopeful that a labor market that was continuing to strengthen would eventually contribute to inflation firming toward its objective. Harker dismissed concerns about recent softness as “unwarranted” and maintained his expectation for three […]
In their individual remarks, participants agreed broadly that the balance sheet should be reduced beginning later this year. Harker preferred waiting for two more rate hikes before initiating reduction, although he was open to starting reduction after only one additional hike. As for the ultimate target configuration of the balance sheet, Williams noted it would […]
Last week featured the first real uneasiness in U.S. financial markets since the presidential election, as the Trump bump to equities immediately after the election threatened to turn into a Trump slump. The couple of FOMC participants who commented on the volatility expected the Committee essentially to look through short-term volatility in financial markets. The […]
FOMC policymakers on the more hawkish end of the spectrum viewed the full employment part of the dual mandate as already attained and foresaw the achievement of two percent inflation soon. As such, they continued to expect further tightening in monetary policy over the balance of the year. Mester made a strong argument for adhering […]
Case for Faster Fed Rate Hikes Builds as Bond Markets Sleep Bloomberg News on May 11, 2017 “They are taking risks here,” said former Fed governor Laurence Meyer, the head of a Washington policy research firm that bears his name. “You are beyond full employment, you have confidence you are heading toward sustainable 2 percent inflation, […]